October 25, 2021

#124: Listener questions - Top investment tips #2 - Selecting a state, city, suburb & dwelling, buying within the bell curve, the role yield

48 minutes

https://propertyplanning.com.au/propertyplannerbuyerprofessor/ In this week's episode Dave, Cate and Pete take you through: Weekly market updates 1. Investor activity and the impact on our rental markets CoreLogic data shows that from early 2017 through to 2019, investor lending started to drop away due to APRA intervention. That means that less investors have been buying rentals property since pre-2017, resulting in less rental properties on the market. This has created a tight rental market with vacancy rates going down and rents increasing. A lot of investors are happy that rents and prices are going up, but this spells some challenges now for the community of renters, which will only increase when international migration picks up again. Supply is inelastic, so the government needs to consider how we're going to increase the supply of property to cater for new entrants to Australia. 2. Predictions on APRA measures The measures instituted by APRA from 2017 to 2019 ground investment lending to a halt. The Property Buyer predicts that we may see a change in policy, where higher buffer rates may only apply to the asset being purchased and not to existing debt, as significant issues will be faced if investors are chased away from the market. The Property Planner predicts that the current APRA measure of raising buffer rate by 0.5% is unlikely to have a large impact and the regulatory body will need to consider other measures to put in place. 3. Parity between median house price and median unit price per suburb Recent data from CoreLogic compares the value of units against houses from 2016 to now for each suburb. There is an emerging opportunity for buyers who are looking at units, where you can identify a sweet spot for advantageous purchasing in a particular area. Older style apartments in the east have taken a hit over the last 10 years, due to gentrification of inner-ring markets in the northern and western parts of Melbourne. This shift saw an outperformance of houses, which were at one stage priced the same as eastern units, as people wanting to buy something for the longer-term and closer to the city and looked to the North and the West. 4. Australia in pole position in the transition to renewable energies Over the next two decades, the IMF expects a sixfold increase in demand for critical minerals worth $17.6 trillion, driven by the race to hit net zero emissions. The IMF has singled Australia to be in the top position to benefit in this transition, as nickel, copper, lithium and cobalt are key components in batteries and renewable energies and crucial in the transition away from fossil fuels. Australia is among the top three for global reserves for each of the four critical minerals, leaving us in a prime position to benefit from the new electricity storage and generation shift. Top investment tips #2 1. Which state or city should you invest in? The trio discuss the considerations of selecting which state or city to invest in, including diversification, market cycles, land tax that eats into your yield, the plans around your future home purchase and the dangers of hot-spotting. 2. Your budget should drive the choice Data confirms that Melbourne and Sydney have outperformed other capital cities over the decades. Selecting an outperforming suburb can make a reasonable difference to your end position over a long period of time. However, it's critical to select a quality asset and if your price range means that you are purchasing a compromised asset, it may pay to look at investing in a different capital city that better aligns with your...

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